Thursday, January 17, 2013

Attempting Claritiy And Objectivity

This is a great day to go over some more trading psychology, this time courtesy of Mark Douglas, author of Trading In The Zone.

Ivan Hoff recently posted 10 insights by Mark Douglas and I'm very thankful because I can't find my copy of the book.

With the futures on an overnight joyride, it seems that finally 1474.51 will get taken out today. That it took an overnight ramp to do it is pretty lame I think. It's also coming on the back of a crushed dollar overnight. So today is an ideal day to keep my head straight.

We need to be rigid in our rules so that we gain a sense of self-trust that can, and will always, protect us in an environment that has few, if any, boundaries. We need to be flexible in our expectations so we can perceive, with the greatest degree of clarity and objectivity, what the market is communicating to us from its perspective.

I would be getting hurt right now if I didn't have rules. The internals of the market are so bad that it took every ounce of patience not to sell my SPY 147 calls yesterday, the day before, and the day before that.

The market doesn't care about internals. In my mind, all it cares about is structure and precision. It keeps its intentions cloaked in mystery and deception. Many times the precise structure of what it has been "drawing" cannot be discovered until well after the fact. But it's always there, and can't be argued with.

So as Douglas says: only by being flexible in our expectations can we perceive with the greatest degree of clarity and objectivity, what the market is communicating to us.

Also, in an environment with few, if any boundaries, one must realize that anything can happen. These scribblings you are reading are an attempt, each day, to identify the boundaries or extremes that the market may have in mind. They're not meant to be correct. They're meant to keep me flexible in my expectations because I never know what the market is going to do next.

With all that said, anything over 1474.51 is gravy today. But there are two areas that the market may shoot for: 1476.81 and 1484.87. I'll be dumping half the SPY 147 calls at the open and will try to sit on the rest until 10 am but will likely dump them too.

If this looks like a valid breakout with strong A/Ds, ticks, volume, and impulsive wave structure, I can always reload.

Getting below 1451.64 would be an indication that the bulls may have overstayed their welcome for a while.

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